Chrysler Working to Cut Rental Car Sales, Improve Margins

Chrysler plans to decrease its rental-car sales as a percentage of its overall 18% U.S. fleet mix, as well as improve margins on some of its vehicle lines, the automaker’s chief financial officer says during a conference call to discuss third-quarter financial results.

Richard Palmer says rental cars now account for one-third of Chrysler fleet sales, but notes the automaker is working to shift toward more profitable commercial-fleet sales with some of its new offerings, including the Ram ProMaster van lineup.

“It’s an area we’re working on now that we have a more competitive passenger-car offering,” he says of new products such as the well-received Chrysler 200 midsize sedan. “It’s something that’s an opportunity in terms of margins going forward.”

Past Chrysler offerings, such as the last-generation 200, were sold to rental-car fleets in large volumes, decreasing the automaker’s profitability.

Palmer says the automaker continues to work on upgrading its vehicle portfolio and is focusing on growing market share and improving its price position, which will lead to less reliance on profit-sapping incentives.  

“We have to continue to grow volumes and that will get (us) leverage as our cost base is being reconstructed to manage product renewal and the volume challenge,” he says. “All of those things should help us with the margin differential we have compared to Ford and General Motors.”

Palmer singles out the Chrysler 200 as a product that will help it improve margins, noting the automaker must build awareness of its newer products.

“Clearly we’re not on the top of peoples’ shopping lists from an awareness point of view,” he says. “It takes time to build brand equity and price positions.”

Chrysler’s Q3 net income totaled $611 million. U.S. retail deliveries were up 20% vs. year-ago, while in Canada retail sales increased 16%. Global Q3 sales were 711,000 units, an 18% hike vs. year-ago.

Operating profit for the quarter was $946 million, up 10% from like-2013, while net revenue jumped 18% to $20.7 billion from $17.6 billion year-ago.

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